Title

Authors

Document Type

Article

Publication Date

5-2012

Abstract

Traditional law and economic analysis has focused on legal rules directly related to the allocation of resources. Today, economic analysis is being used to examine more traditional legal issues. This article explores one such traditional legal issue by applying economic methodology to the legislative-judicial interaction or “bargaining game.” The purpose of this article is to determine the impact of judicial interpretation on regulatory legislation. Most studies of the political economy of regulation have focused on elected politicians (e.g., Congressmen), ignoring the role of the courts. Yet, judges interpret the law and may, in the extreme, reverse legislative decisions. Studying the influence of the judiciary on the legislature’s regulatory decisions remains an unexplored but important issue. The model allows us to address a variety of issues central to national policy making, for example, how the court influences legislative choices. We focus on an issue raised in the legal literature and in judicial opinions. Suppose a regulatory statute has been altered or reinterpreted by the courts, and we then observe that Congress does not act to change the court ruling. What can we infer from this lack of action? Many prominent political and legal scholars conclude that this inaction indicates acceptability by a majority of legislators. Because there exists no analytical foundation for assessing how judicial decisions affect legislative decision making over regulatory issues, however, such conclusions rest on questionable assumptions. The purpose of this article is to develop a formal economic model of legislative-judicial interaction. The model allows us to predict the circumstances in which Congress will and will not change judicial decisions. The model shows that congressional inaction is not a sign of acceptability by a majority of legislators. Instead, congressional inaction is a consequence of congressional structure and procedures: committees play an important role here, as does bicameralism. This model will be used to explore and explain the legislative events surrounding the Supreme Court decision Grove City College v. Bell (1984), a case involving statutory interpretation and the Department of Education’s regulatory provisions prohibiting sex discrimination. (JEL D72, D78, K00, K40, Z18)